Principal HSA Basics
HSAs are still a relatively new concept in the world of health benefits. Get all the details, including:
- How HSAs work
- Types of companies that are eligible
- Types of individuals that are eligible
- Advantages for employees
- How HSA funds can be used
How HSAs work
People covered by a qualified high deductible health plan can contribute funds to an HSA. Those funds can be withdrawn to use for qualified medical care or to apply to deductibles.
HSA funds are “triple-exempt” from taxes:
- Contributions are not subject to federal income tax and are called “pre-tax” dollars.
- The funds in the account can grow on a tax-free; that is, they earn interest or other investment returns without tax.
- No federal taxes are levied on withdrawals if the funds are used to pay for qualified medical expenses.
In addition, unused balances in the HSA carry forward to future years and there is no limit on growth. There is no use-it or lose-it component to an HSA like there is with some other products such as flexible spending accounts (FSAs).
What types of companies are eligible?
Almost any company can be eligible. There are no employer size restrictions nor are there employee income restrictions. In addition, Sole proprietors, partners or shareholders of Subchapter S corporations can contribute to an HSA on a tax-advantaged basis.
If you are interested in setting up an HSA, call our HSA Hotline.
What types of individuals are eligible?
Most people can participate in an HSA by meeting a few simple requirements.
- You must be covered under a qualifying HDHP
- You cannot be covered under any medical insurance that is not a qualifying HDHP, and you cannot be covered as a dependent under someone else’s non-qualifying insurance.
- You can have insurance coverage or other arrangements for accidents, disability, dental care, vision care, and long-term care. Coverages such as liability, worker’s compensation, property and casualty, insurance for specific diseases, or insurance that pays a fixed amount per day of hospitalization are all permitted.
- Upon enrolling in Social Security Medicare, you can no longer make HSA contributions. If you have an existing HSA, you can still use the money you have already accumulated.
- Want to find out if you’re eligible? Try our HSA calculator!
What are the advantages for employees?
Individuals get the ability to use some of the money they once spent on health coverage as they see fit. The HSA funds belong to the participant, not the employer, so they’re portable from job to job or into retirement.
All of these things encourage members to make good health and health care choices in order to make the best use of their own money. This can help drive long-term health care cost control.
How can HSA funds be used?
HSA funds can be used to pay your deductible or other out-of-pocket qualifying medical expenses as outlined in Section 213(d) of the Internal Revenue Code. These are the same medical expenses the IRS has determined are deductible for income tax purposes.
For more information
- Are you interested in setting up an HSA? If so, call our HSA Hotline
- Learn about Principal HSA top features
- Read the HSA Flyer
- Learn about our one-source solution for HDHPs and HSAs
- Contact your insurance broker
- Find a local Principal Life sales office
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| EC781-1 | 09/2007 |
High deductible health plans and custodial services for HSAs offered by Principal Life Insurance Company. Bank products and services provided by Principal Bank, Member FDIC, Equal Housing Lender. HSA monies held in a Principal Bank account are FDIC insured. Insurance and securities are not FDIC insured and have no bank guarantee. Securities may lose value. Securities offered through Princor Financial Services Corporation, 800.247.4123, member SIPC. Principal Life, Principal Bank, and Princor® are members of the Principal Financial Group, Des Moines, IA 50392.
